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Dive Brief:

The New Mexico Supreme Court has ruled in favor of the Public Service Commission and the state's largest utility, which could allow Public Service Co. of New Mexico to replace shuttered coal generation with more coal capacity in the near-term, and nuclear.

The lengthy and complicated case began in 2011, when the U.S. Environmental Protection Agency rejected a plan to address regional haze. PNM submitted a revised plan that would compel the utility to shutter Units 2 and 3 at the San Juan coal-fired plant. Those units closed in December, and PNM announced a plan last year to completely phase out coal by 2031.

The units generated more than 800 MW, but the utility's plan to replace that with coal and nuclear capacity was challenged by environmental group New Energy Economy.

Dive Insight:

Documents in this lawsuit span more than 50,000 pages, a "massive" volume according to the high court's ruling. But the outcome is relatively simple: PNM can move forward with replacing the shuttered San Juan generation, executing a plan state regulators already approved.

NEE's lawsuit claimed state regulators violated the law by approving a contested stipulation, but the court determined that the group's arguments "are predicated on a mistaken understanding of the law and ask us to accept factual assertions that were rejected below."

Retirement of the two San Juan units resulted from a revised state implementation plan, which came out of an agreement between the New Mexico Environment Department, the U.S. Environmental Protection Agency and PNM. Retiring the units was deemed necessary for the San Juan plant to comply with federal visibility regulations under the Clean Air Act. PNM said retiring the two units reduced the plant's emissions by half.

According to PNM, the replacement generation mix is "diverse," but it is also mainly nuclear and coal. The utility will buy energy from Unit 3 at the Palo Verde nuclear plant and additional capacity from San Juan Unit 4, but noted in its latest Integrated Resource Plan that it plans to phase out all coal by 2031. PNM also issued a request for proposals for fuel resources, which include storage and renewable energy. However, PNM wants to keep its stake in the Palo Verde nuclear facility, a major sticking point with some of its stakeholders.